Professional Documents
Culture Documents
Paper 1 Merged
Paper 1 Merged
2 Which combination of a factor of production and its factor income is not correct?
factor of
factor income
production
A capital interest
B enterprise profit
C labour dividends
D land rent
3 The diagram shows a production possibility curve (PPC) for a country. The country moved from
position X to position Y on the PPC.
capital
goods
X
O consumer goods
5 Why might a market economy fail to achieve the best use of scarce resources?
6 The diagram shows the global market for copper with an equilibrium point of X.
Which point represents the new equilibrium after the copper producers’ costs increase and there
is rapid global economic growth?
price S2
S1
A S3
D X B
C
D2 D1 D3
O quantity
price
($)
S
12
10
0 100 140
quantity
(units)
What is the price elasticity of supply when the price rises from $10 to $12?
income spending
($ per month) ($ per month)
3000 3150
3300 3375
3600 3500
3900 3825
4200 4050
4500 4275
12 The table shows the output and total costs of a small firm.
0 50 000
1 000 100 000
5 000 400 000
10 000 600 000
A $5 B $6 C $55 D $60
13 A firm has fixed costs of $1000. The table shows the variable cost at different levels of output.
output (units) 1 2 3 4
variable cost ($) 100 190 270 350
If the goods are sold for $500 each, how much profit will be made from the sale of 4 units?
14 Firm X supplies bricks and decides to merge with firm Y that also supplies bricks.
A backward vertical
B conglomerate
C forward vertical
D horizontal
A individuals
B shareholders
C specialist managers
D the government
16 What are two aims that a government normally pursues when managing the performance of the
whole economy?
18 The table shows the tax that an individual would pay at different levels of disposable income.
disposable
10 000 20 000 30 000 40 000
income ($)
tax ($) 0 2000 4000 6000
A corporation tax
B indirect tax
C progressive tax
D regressive tax
21 The table shows the rates of unemployment and real GDP growth for an economy in 2014 and
2018.
2014 2018
rate of
3 10
unemployment (%)
rate of real GDP
4 –2
growth (%)
Which combination of policy measures would be most effective in returning the economy to the
2014 level of economic activity?
23 Some goods take a greater percentage of a typical household’s total spending than others.
24 In countries with absolute poverty, low incomes can start a process that keeps incomes low.
A low incomes low consumption low prices low output low incomes
B low incomes low government spending high taxation low employment low
incomes
C low incomes low investment high profits low dividends low incomes
D low incomes low saving low investment low productivity low incomes
25 Which factor in the world’s low-income countries limits their economic development?
26 The table shows the percentage employment in the primary, secondary and service sectors in
four countries.
percentage employment
primary secondary service
country
sector sector sector
A 10 35 55
B 20 60 20
C 35 35 30
D 40 40 20
$m
A a deficit of $7 million
B a deficit of $13 million
C a surplus of $7 million
D a surplus of $13 million
30 The diagram shows the value of a country’s exports and imports of goods over five years.
30
$m 25
key
20
exports of goods
15
imports of goods
10
0
1 2 3 4 5
year
Between which two years did the country have an increase in the value of imports and an
improvement in its balance of trade in goods?
A decisions of entrepreneurs
B high inputs of capital
C long hours of manual labour
D plentiful supplies of land
3 The diagram shows an economy’s production possibility curve (PPC). The economy moves from
point X to point Y.
capital
goods X
O consumer
goods
A a bank manager
B a government finance minister
C a shareholder in a firm
D a worker
6 The diagram shows a shift in the supply curve for cars in China from S1 to S2.
price
S2
S1
O quantity
What is the most likely cause of this shift in the supply curve?
7 The price elasticity of supply of a good is 2. The price of the good then falls by 10%.
A It falls by 0.2%.
B It falls by 20%.
C It increases by 0.2%.
D It increases by 20%.
8 A German car manufacturer builds a factory in India. A group of Indian workers at the factory join
a trade union.
income spending
($ per month) ($ per month)
3000 3150
3300 3375
3600 3500
3900 3825
4200 4050
4500 4275
B government spending
C the exchange rate
D the rate of interest
12 In the short run, a firm calculates its total fixed cost, total variable cost and total cost. It then plots
a graph showing how they change as output increases.
What happens to the lines showing the total variable cost and total cost as output increases?
13 A firm has fixed costs of $1000. The table shows the variable cost at different levels of output.
output (units) 1 2 3 4
variable cost ($) 100 190 270 350
If the goods are sold for $500 each, how much profit will be made from the sale of 4 units?
14 When is it most likely that the demand for labour in an industry increases?
16 What are two aims that a government normally pursues when managing the performance of the
whole economy?
18 Which measure would indicate that an expansionary fiscal policy is being used by the
government?
19 The diagram shows how a government policy influences the market for biofuel crops in the
private sector.
O quantity
According to the diagram, which policy does the government use and what effect does it have on
the market?
policy effect
A imports of goods
B interest rates
C public sector spending
D taxation of firms
21 In 2016, Romania had an increase in its real gross domestic product of 4.8%.
23 Some goods take a greater percentage of a typical household’s total spending than others.
25 Which factor in the world’s low-income countries limits their economic development?
26 The table shows the percentage employment in the primary, secondary and service sectors in
four countries.
percentage employment
primary secondary service
country
sector sector sector
A 10 35 55
B 20 60 20
C 35 35 30
D 40 40 20
27 A government is faced with an unwanted deficit on the current account of its balance of
payments.
A The government intervenes to reduce the exchange rate of the country’s currency.
B The rate of exchange of exports for imports for a country deteriorates.
C The rate of inflation in a country continues to rise.
D The value of a country’s currency falls on the international exchange market.
29 The table shows information from a country’s current account of its balance of payments.
$ billion
exports of goods 20
imports of goods 24
net services +5
net primary income –8
net secondary income –8
30 The diagram shows the value of a country’s exports and imports of goods over five years.
30
$m 25
key
20
exports of goods
15
imports of goods
10
5
0
1 2 3 4 5
year
Between which two years did the country have an increase in the value of imports and an
improvement in its balance of trade in goods?
3 Sam wrote a list of how he would prefer to spend his Saturday afternoon.
Unfortunately a thunderstorm caused the cricket match and the town parade to be cancelled.
Sam went to the cinema.
5 In a private market system certain goods and services would not be available unless the
government intervened.
A market distribution
B market equilibrium
C market failure
D market structure
6 There has been a movement upwards along the supply curve of a product.
7 Price elasticity of demand (PED) measures the responsiveness of demand to a change in price. It
can differ for different goods.
For which good is the PED most elastic according to the table?
central commercial
government
bank banks
A no yes no
B no yes yes
C yes no no
D yes no yes
10 The table shows how three people (X, Y and Z) spend their income.
For these three people, what is the most likely order of income, from highest income to lowest
income?
A X → Y→ Z
B Y→Z→X
C Z→X→Y
D Z→Y→X
Which combination of incomes and cost of living is most likely to cause her to choose the
German orchestra?
13 In 2015, a large UK company attempted to acquire a rival US medical company to become the
world’s leading supplier. Both companies specialised in the manufacture of medicines for treating
rare diseases.
14 The table shows the sales of cold drinks made by a company in the UK in 2016 and 2017.
Demand for cold drinks is influenced by changes in the temperature. In 2016 the sales followed
the usual seasonal pattern.
A May
B June
C July
D August
15 A firm producing bicycles has the following costs at different levels of output.
10 300 800
20 300 1500
30 300 3300
What happens to the average total cost over this range of output?
A It falls continuously.
B It falls then rises.
C It rises continuously.
D It rises then falls.
17 A government uses a mixture of fiscal policy measures and supply-side policy measures to
stimulate growth in the economy.
5 000 500
12 000 2400
20 000 5000
30 000 6000
A continually progressive
B progressive then regressive
C proportional
D regressive then progressive
19 The government uses monetary policy and reduces the interest rate.
20 What is the most likely result of a sustained increase in Gross Domestic Product (GDP)?
21 Which indicator would be included in the Human Development Index (HDI) for a country?
22 Which type of unemployment is the result of a permanent fall in the demand for the products of
an industry?
A cyclical
B frictional
C seasonal
D structural
23 The graph shows the rate of inflation in a country between 2000 and 2014.
8
inflation rate 7
% 6
5
4
3
2
1
0
2000 2010 2014
year
25 In Botswana, better healthcare has meant that birth rates have been falling faster than death
rates. Also the number of children born, on average, to each woman has declined from 6.4 to 3.2.
26 The table shows the percentage share of GDP held by the richest 20% and poorest 20% of the
population in each country.
27 What would cause a favourable change in the Kenyan trade in services (invisible) account?
29 A trade union succeeds in raising the wages in an industry above the current equilibrium wage.
A fall fall
B fall rise
C rise fall
D rise rise
30 What would reduce the volume of international trade in the world economy?
output of 100
capital goods
X Y
50
0
0 50 80 90
output of
consumer goods
3 Sam wrote a list of how he would prefer to spend his Saturday afternoon.
Unfortunately a thunderstorm caused the cricket match and the town parade to be cancelled.
Sam went to the cinema.
6 What can cause the supply curve for a product to shift to the right?
7 A railway company increases ticket prices by 10% for travel between 06:00 and 09:00, causing a
reduction in demand by 2%. After 09:00 it reduces ticket prices by 5%, resulting in a 7% increase
in demand.
between 06:00
after 09:00
and 09:00
A elastic elastic
B elastic inelastic
C inelastic elastic
D inelastic inelastic
10 The table shows how three people (X, Y and Z) spend their income.
For these three people, what is the most likely order of income, from highest income to lowest
income?
A X → Y→ Z
B Y→Z→X
C Z→X→Y
D Z→Y→X
Which combination of incomes and cost of living is most likely to cause her to choose the
German orchestra?
12 Which type of business organisation is necessarily in the public sector of the economy?
A multinational company
B public limited company
C public corporation
D sole trader
A high possible
B high impossible
C low possible
D low impossible
14 The table shows the sales of cold drinks made by a company in the UK in 2016 and 2017.
Demand for cold drinks is influenced by changes in the temperature. In 2016 the sales followed
the usual seasonal pattern.
A May
B June
C July
D August
15 A firm producing bicycles has the following costs at different levels of output.
10 300 800
20 300 1500
30 300 3300
What happens to the average total cost over this range of output?
A It falls continuously.
B It falls then rises.
C It rises continuously.
D It rises then falls.
16 Why are indirect taxes, such as VAT of 20% on goods and services, described as regressive
when comparing high-income and low-income purchasers?
18 Which combination of policy measures would be effective in reducing the effects of a recession?
A no no yes
B no yes no
C yes no yes
D yes yes no
A hyperinflation
B income taxes
C interest rates
D investment
21 Why was the Human Development Index (HDI) introduced as a measure of the standard of
living?
22 During periods of high unemployment across the entire labour force, the highest unemployment
rate in an economy is often in the 16–19 year-old age group.
Which statement explains why 16–19 year-olds may find it difficult to find a job?
23 Venezuela, a leading world oil producer, has experienced hyperinflation of over 400% per annum
in recent years.
prices effect
A fluctuate up and down consumers are uncertain about future price levels
B fluctuate up and down consumers can anticipate future price levels
C rise very rapidly value of fixed assets remains stable
D rise very rapidly money has limited worth as a medium of exchange
25 In Botswana, better healthcare has meant that birth rates have been falling faster than death
rates. Also the number of children born, on average, to each woman has declined from 6.4 to 3.2.
26 The table shows the percentage share of GDP held by the richest 20% and poorest 20% of the
population in each country.
27 What would cause a favourable change in the Kenyan trade in services (invisible) account?
29 What would cause a rise in the deficit on the current account of the balance of payments?
30 What would reduce the volume of international trade in the world economy?
factor example
2 Hospital services are provided by the government and paid for through taxation. People cannot
always get the treatment they require because of long waiting lists.
A external cost
B market system
C perfectly inelastic supply
D scarcity
output of R
W Z
Y
X
O
output of S
A W to X B W to Y C Y to X D Y to Z
4 Who determines what goods and services are produced in a market economy?
A consumers
B employees
C government
D trade unions
5 The diagram shows the demand for and the supply of air travel.
price of S
air tickets
$
D2
D1
O
number of
passengers
6 In 2015, the world price of oil fell rapidly due to changes in the conditions of demand and supply.
One change was the use of a new method of extraction called fracking.
7 The table shows the demand and supply for spices in a market in Africa.
10 50 10
20 40 20
30 30 30
40 20 40
When the price rises from US$20 to US$30 per kg, what is the price elasticity of demand (PED)
for spices?
9 What might cause an increase in the earnings of a doctor in a government health service?
10 What would put a trade union in a strong bargaining position to negotiate higher wages for its
members in a particular firm?
A The demand for the product produced by the workers has an inelastic demand.
B The economy is experiencing high unemployment.
C The proportion of the firm’s workers in the union is low.
D Wage costs are a high proportion of total costs for firms in the industry.
11 What is most likely to encourage the immediate purchase of an expensive item such as a new
car?
14 The table shows a firm’s average revenue and average cost at different levels of output.
When all output is sold, which level of output gives maximum profit?
A 5 10 30
B 10 20 20
C 15 25 15
D 20 30 18
18 A government aims to boost production and increase sales of steel by subsidising private
producers. A subsidy equal to W – Z per tonne is paid.
According to the diagram, what would be the value of sales of steel after the subsidy?
O Q Q1
quantity
(tonnes of steel)
19 In which case is success for the government in achieving the first aim likely to cause problems in
achieving the second?
A Economic growth in the economy falls for at least two consecutive quarters.
B Gross domestic product (GDP) falls for at least two consecutive quarters.
C The current account of the balance of payment is in deficit for at least two consecutive
quarters.
D The government experiences a budget deficit for at least two consecutive quarters.
22 The diagram shows the rate of unemployment and the periods of recession in a country between
1978 and 2012.
12
unemployment 10
rate %
8
key
6 recession years
0
1980 1990 2000 2010
23 A country experienced its usual August increase in the rate of unemployment. Unfortunately this
was followed by the loss of jobs resulting from the regular downturn in global economic activity.
A cyclical structural
B frictional seasonal
C seasonal cyclical
D structural frictional
24 What is the most likely effect of raising the retirement age in a country?
26 Developing countries are sometimes given aid by charities and foreign governments.
Which aid programme would be least likely to lead to long-term economic growth?
27 A government imposes a limit of 2 million on the number of smartphones imported into the
country.
A ban
B embargo
C quota
D tariff
28 What is most likely to happen if South Korea builds a factory in Switzerland that becomes
profitable?
29 In July 2015, Australia’s balance of trade with the rest of the world was –2809 billion Australian
dollars. In January 2016 it was –3294 billion Australian dollars.
A deficit improving
B deficit worsening
C surplus improving
D surplus worsening
30 The table shows the tariffs imposed on imported tropical fruit in the European Union (EU)
according to the degree of processing.
EU tariffs
(% rate)
A capital
B enterprise
C labour
D land
capital goods
Z
X
O
consumer goods
4 China, the world’s second largest economy, is becoming more like a market economy.
5 The diagram shows the market for a firm making clothing with an initial equilibrium of X.
What will be the new equilibrium if there is a successful advertising campaign by a rival firm and
an increase in workers’ wages?
S2
price
S1
S3
B
A C
X
D
D3
D1
D2
O quantity
6 Coal production in the UK has declined in recent years. One reason given for this is that the
social cost of coal production is too high.
A all the benefits of coal production minus all the costs of coal production
B the cost of the environmental damage caused by coal production
C the cost to the government of subsidising the coal industry
D the private costs of coal production plus the external costs of coal production
7 The table shows the demand and supply for spices in a market in Africa.
10 50 10
20 40 20
30 30 30
40 20 40
When the price rises from US$20 to US$30 per kg, what is the price elasticity of demand (PED)
for spices?
8 A central bank acts as a lender of last resort especially in times of financial crisis.
A a fall in investment
B a fall in real wages
C a rise in income taxes
D a rise in interest rates
11 Petrol (fuel) retailers in a country have noticed a sharp increase in sales in August when many
people take their holidays.
14 The table shows a firm’s average revenue and average cost at different levels of output.
When all output is sold, which level of output gives maximum profit?
A 5 10 30
B 10 20 20
C 15 25 15
D 20 30 18
18 The table shows the amount of tax paid as income rises in four countries, A–D.
19 In which case is success for the government in achieving the first aim likely to cause problems in
achieving the second?
A consumer spending.
B gross domestic product.
C the output of the manufacturing and construction industries.
D the retail price index (RPI).
21 Four groups who are affected by changing economic conditions are creditors, debtors, exporters
and importers.
22 The diagram shows the rate of unemployment and the periods of recession in a country between
1978 and 2012.
12
unemployment 10
rate %
8
key
6 recession years
0
1980 1990 2000 2010
23 A country experienced its usual August increase in the rate of unemployment. Unfortunately this
was followed by the loss of jobs resulting from the regular downturn in global economic activity.
A cyclical structural
B frictional seasonal
C seasonal cyclical
D structural frictional
26 Developing countries are sometimes given aid by charities and foreign governments.
Which aid programme would be least likely to lead to long-term economic growth?
27 It is estimated that in 2016 the Olympic Games in Rio, Brazil attracted over 600 000 foreign
visitors.
28 What is most likely to happen if South Korea builds a factory in Switzerland that becomes
profitable?
imports exports
30 The table shows the tariffs imposed on imported tropical fruit in the European Union (EU)
according to the degree of processing.
EU tariffs
(% rate)
A capital
B enterprise
C labour
D land
3 The diagram shows the production possibility curve (PPC) for an economy.
capital goods
X
Z
O
consumer goods
What will happen to the opportunity cost of producing more units of consumer goods in terms of
capital goods as the economy moves down its PPC from point X to point Z?
5 The diagram shows the equilibrium market price PE and quantity QE for rice in a country.
price
S
P1
PE
O QE
quantity
Which government action could cause the market price for rice to become P1?
6 A major highway has been built at a cost of US$175 million between Nairobi, Kenya and its
suburbs. This reduces travel time and increases safety, but there are environmental problems for
small enterprises along its route.
7 The table shows the demand and supply for spices in a market in Africa.
10 50 10
20 40 20
30 30 30
40 20 40
When the price rises from US$20 to US$30 per kg, what is the price elasticity of demand (PED)
for spices?
A collecting taxes
B issuing currency
C providing bank accounts for individuals
D setting foreign trade tariffs
9 What is most likely to increase the total output of a firm in the short run?
10 What will make it harder for a trade union to increase the wage rate for its members, without
reducing employment?
A diamonds
B foreign currency
C petrol (fuel)
D washing machines
13 Which form of production would be least likely to have the advantages of economies of scale?
A car manufacturing
B commercial cereal farming
C handmade jewellery
D refining of oil products
14 The table shows a firm’s average revenue and average cost at different levels of output.
When all output is sold, which level of output gives maximum profit?
A 5 10 30
B 10 20 20
C 15 25 15
D 20 30 18
18 In the diagram, which level of subsidy per kilo would a government have to give to producers to
encourage them to increase production from 20 kilos per week to 30 kilos per week?
S1
price
(US$)
20 S2
15
12
0
0 20 30
kilos per week
19 In which case is success for the government in achieving the first aim likely to cause problems in
achieving the second?
20 An increase in which economic indicator is usually taken as the measure of a country’s economic
growth?
22 The diagram shows the rate of unemployment and the periods of recession in a country between
1978 and 2012.
12
unemployment 10
rate %
8
key
6 recession years
0
1980 1990 2000 2010
23 A country experienced its usual August increase in the rate of unemployment. Unfortunately this
was followed by the loss of jobs resulting from the regular downturn in global economic activity.
A cyclical structural
B frictional seasonal
C seasonal cyclical
D structural frictional
A 3 10 98
B 3 22 65
C 27 32 56
D 33 35 70
26 Developing countries are sometimes given aid by charities and foreign governments.
Which aid programme would be least likely to lead to long-term economic growth?
28 What is most likely to happen if South Korea builds a factory in Switzerland that becomes
profitable?
30 The table shows the tariffs imposed on imported tropical fruit in the European Union (EU)
according to the degree of processing.
EU tariffs
(% rate)
2 A government decides to spend more on defence and cannot spend money on a new airport.
3 The diagram shows a production possibility curve diagram. A country’s initial position is X.
services
R
X
T
O manufacturing
Better manufacturing processes are introduced and the country improves its tourist facilities.
A S to T B T to R C X to R D X to T
6 The table illustrates the demand and supply for coffee in a market in Africa.
10 50 10
20 40 20
30 30 30
40 20 40
50 10 50
When the price rises from $20 to $30 per kg, what is the price elasticity of demand for coffee?
7 In recent years the price of crude oil on the world market has fallen dramatically. One cause has
been the increase in oil obtained by the new extraction process of fracking.
How is this shown on a demand and supply diagram of the market for crude oil?
9 Which workers are most likely to gain the highest increase in wages from a pay rise of 2%?
A airline pilots
B farm workers
C nurses
D shop assistants
10 A female accountant in a private firm earns $80 per hour; a male Professor of Finance in a
government university earns $40 per hour. Each works the same number of hours.
11 Each of the four sets of descriptions in the table refers to a person applying for a job.
13 Private multinational clothing companies operate in developing countries to reduce their average
costs of production.
14 A major computer company announced that its profits had fallen below the level predicted.
15 An entrepreneur buys a workshop for $10 000 to make picture frames. In the first year he spent
$40 000 on materials and employed two workers. He paid the workers for each frame produced
with a total cost of $30 000. He bought a vehicle to deliver the frames for $10 000.
16 What, when increased, will help a government to reduce the rate of inflation?
A budget deficit
B consumer spending
C income tax
D pensions
A
% income B
paid in
taxation C
O income
$m
customs duties 100
taxes on goods 200
taxes on income 400
taxes on services 300
20 Why is the Human Development Index (HDI) often considered to be better than Gross Domestic
Product (GDP) per head as a measure of living standards?
country X country Y
percentage 70 percentage 70
employed employed
60 60
50 50
40 40
30 30
20 20
10 10
0 0
primary secondary services primary secondary services
A business confidence
B consumer spending
C government revenue
D government welfare payments
24 The birth rate and death rate in a country are the same.
What is likely to happen if there is a decrease in the birth rate, while the death rate and migration
remain the same?
25 The charts show the population structure of a country in 1960 and 2015.
1960 2015
male age female male age female
85+ 85+
80 – 84 80 – 84
75 – 79 75 – 79
70 – 74 70 – 74
65 – 69 65 – 69
60 – 64 60 – 64
55 – 59 55 – 59
50 – 54 50 – 54
45 – 49 45 – 49
40 – 44 40 – 44
35 – 39 35 – 39
30 – 34 30 – 34
25 – 29 25 – 29
20 – 24 20 – 24
15 – 19 15 – 19
10 – 14 10 – 14
5–9 5–9
0–4 0–4
3 2 1 0 0 1 2 3 3 2 1 0 0 1 2 3
millions millions
A average age
B number of people below 15
C number of people over 60
D total population
26 The table shows the Consumer Prices Index (CPI) for selected cities for August 2015 relative to
New York, USA at 100.
city CPI
A increased choice
B increased government revenue
C more competition
D more trade
28 What is an increase in the value of an exchange rate of a currency in a floating system called?
A appreciation
B depreciation
C devaluation
D revaluation
29 A developing economy has a surplus on its trade in goods of $75 billion and a deficit on its trade
in services of $25 billion, while its current account is in overall balance.
Which values for net income (primary income) and net transfers (secondary income) result in the
current account being in balance?
2 A government allowed a building company to construct new houses which destroyed an area
designated as an area of natural beauty.
3 The diagram shows a production possibility curve. The country is using all its resources to
produce both manufactured goods and services.
K
manufacturing
M
L
N
O services
A K to N B L to K C N to K D N to M
A higher employment
B higher fixed costs
C increased production
D increased traffic congestion
6 The table illustrates the demand and supply for coffee in a market in Africa.
10 50 10
20 40 20
30 30 30
40 20 40
50 10 50
When the price rises from $20 to $30 per kg, what is the price elasticity of demand for coffee?
7 It was reported that the supply of oil would be affected by the discovery of new oil fields and
demand would be affected by rapid global economic growth.
If point X is the initial equilibrium point, which point could represent the new equilibrium?
price
S2
B S1
A
S3
X
C
D
D3
D2 D1
O
quantity
9 Which change will make a manufacturing company replace machines with labour to maintain the
most efficient combination of factors of production?
10 Although there are higher paid jobs in offices many workers stay in low-paid jobs on farms.
11 The diagram shows two curves. One is the demand for labour, the other is the supply of labour. A
government fixes a minimum wage (MW) that must be paid by employers.
wage
W
MW
O labour employed
14 A major computer company announced that its profits had fallen below the level predicted.
15 The table shows the variable costs of a firm. It can sell the units for $5 each. Its fixed costs are
$10.
A 10 B 11 C 12 D 13
16 What, when increased, will help a government to reduce the rate of inflation?
A budget deficit
B consumer spending
C income tax
D pensions
17 The government introduces a new tax. It adds $1 to the price of every $10 good and $2 to the
price of every $20 good.
it is a it is a it is a
direct tax specific tax progressive tax
A no no no
B no no yes
C yes yes no
D yes yes yes
A
% income B
paid in
taxation C
O income
19 A worker earns $40 000 a year and pays 20% income tax.
He spends $5000 on electrical goods and $10 000 on a car, and pays 20% sales tax on each.
20 Why is the Human Development Index (HDI) often considered to be better than Gross Domestic
Product (GDP) per head as a measure of living standards?
21 A finance minister reported that the economy was experiencing inflation and economic growth.
country X country Y
percentage 70 percentage 70
employed employed
60 60
50 50
40 40
30 30
20 20
10 10
0 0
primary secondary services primary secondary services
23 What would be a cause of cost-push inflationary pressure in an industry which supplies mobile
(cell) phones?
24 What is most likely to cause an increase in the population growth of a developing country?
A a decrease in immigration
B a decrease in the birth rate
C a decrease in the death rate
D a decrease in the standard of living
25 The charts show the population structure of a country in 1960 and 2015.
1960 2015
male age female male age female
85+ 85+
80 – 84 80 – 84
75 – 79 75 – 79
70 – 74 70 – 74
65 – 69 65 – 69
60 – 64 60 – 64
55 – 59 55 – 59
50 – 54 50 – 54
45 – 49 45 – 49
40 – 44 40 – 44
35 – 39 35 – 39
30 – 34 30 – 34
25 – 29 25 – 29
20 – 24 20 – 24
15 – 19 15 – 19
10 – 14 10 – 14
5–9 5–9
0–4 0–4
3 2 1 0 0 1 2 3 3 2 1 0 0 1 2 3
millions millions
A average age
B number of people below 15
C number of people over 60
D total population
26 At the start of the year a developing country had a population of 1 000 000, its birth rate was 16.0
per thousand per annum and its death rate was 8.0 per thousand per annum. At the end of the
year the population was 1 005 000.
A increased choice
B increased government revenue
C more competition
D more trade
28 Which name is given to the external value of a currency in terms of another currency?
29 It was reported in 2011 that the United States (US) needed to achieve a lower current account
deficit.
A a protectionist policy
B a strong exchange rate
C increased private sector spending
D investment in the US by multinational firms
30 The table shows the number of units of foreign currency that the UK pound (UK£) could buy in
August 2012 and August 2013.
What can be concluded from the table about the change in currency values between 2012 and
2013?
1 An oil company announced in 2015 that it was starting its drilling operations for oil deposits in the
Arctic Ocean.
2 A self-employed fortune teller earns a living by reading the palms of people’s hands.
3 A country is operating at point X on its production possibility curve (PPC). A drought significantly
reduces agricultural output.
manufacturing A
output B
X
C
O
agricultural output
4 A government needs to decide how much to fine firms for causing the external costs of air
pollution in industrial areas.
Which external cost would be the most difficult to measure in monetary terms?
6 The table illustrates the demand and supply for coffee in a market in Africa.
10 50 10
20 40 20
30 30 30
40 20 40
50 10 50
When the price rises from $20 to $30 per kg, what is the price elasticity of demand for coffee?
7 Between 2005 and 2015 the number of late-night music clubs in the UK fell from 3144 to 1733.
The causes were said to be the increase in the cost to clubs of planning regulations and the
increase in alternative ways of meeting people on social media.
How would the effect of these causes be shown on a demand and supply diagram for entrance to
late-night music clubs?
increase in
planning regulations
dating websites
A movement down shift of
the supply curve demand curve to left
B movement up movement up
the supply curve the demand curve
C shift of shift of
supply curve to left demand curve to left
D shift of shift of
supply curve to right demand curve to right
8 A job offers employees piecework, commission, paid holidays and a company pension.
9 When will a trade union be most likely to succeed in achieving the aims of its members?
10 The typical pattern of income over a person’s whole lifetime is shown by which diagram?
A B C D
11 When choosing an occupation people often consider things other than the wage-rate.
What would not be a good match for the type of work that is desired?
14 A major computer company announced that its profits had fallen below the level predicted.
15 The diagram shows the fixed costs, variable costs and total costs of a firm.
T
costs
O Q
output
A QR B QT C RT D ST
16 What, when increased, will help a government to reduce the rate of inflation?
A budget deficit
B consumer spending
C income tax
D pensions
A
% income B
paid in
taxation C
O income
A economic growth
B government welfare payments
C the price level
D the standard of living
20 Why is the Human Development Index (HDI) often considered to be better than Gross Domestic
Product (GDP) per head as a measure of living standards?
A an increase in expenditure
B an increase in interest rates
C an increase in sales (goods and services) tax
D an increase in the government’s budget surplus
country X country Y
percentage 70 percentage 70
employed employed
60 60
50 50
40 40
30 30
20 20
10 10
0 0
primary secondary services primary secondary services
25 The charts show the population structure of a country in 1960 and 2015.
1960 2015
male age female male age female
85+ 85+
80 – 84 80 – 84
75 – 79 75 – 79
70 – 74 70 – 74
65 – 69 65 – 69
60 – 64 60 – 64
55 – 59 55 – 59
50 – 54 50 – 54
45 – 49 45 – 49
40 – 44 40 – 44
35 – 39 35 – 39
30 – 34 30 – 34
25 – 29 25 – 29
20 – 24 20 – 24
15 – 19 15 – 19
10 – 14 10 – 14
5–9 5–9
0–4 0–4
3 2 1 0 0 1 2 3 3 2 1 0 0 1 2 3
millions millions
A average age
B number of people below 15
C number of people over 60
D total population
A 52 450 50
B 54 490 40
C 60 550 15
D 60 500 25
A increased choice
B increased government revenue
C more competition
D more trade
28 What is a country said to have if the value of its exported goods exceeds the value of its imported
goods?
29 An Argentine product initially sells in the US for $50 when the exchange rate between the two
countries is 5 pesos to 1 dollar
The exchange rate changes to 10 pesos to 1 dollar and the price of the product remains
unchanged in Argentina.
A a $20 banknote
B an office
C a photocopier
D a secretary
3 In 2014 private companies began to drill in areas of the country to exploit natural gas supplies
that were known to exist.
R
V
manufactured
goods S
T
U
O gas supplies
How might this decision be represented on the diagram which shows a production possibility
curve for the country?
A by a movement from R to S
B by a movement from R to V
C by a movement from S to T
D by a movement from U to V
4 The market for a good was in equilibrium. A change occurred which resulted in a new equilibrium
with a higher price for the good and a lower quantity traded.
What is most likely to decrease as a result of an increase in demand for cocoa beans?
This is likely to
7 The use of cars in many cities creates negative externalities. The diagram shows the free market
equilibrium X1 and the socially efficient market equilibrium X2.
S2
S1
costs P2 X2
/ benefits
P1 X1
D
O
quantity
8 What could increase the ability of a trade union to gain a pay rise for its members in a coat
factory?
10 Nazmin Uddin works in a local office as a secretary three days a week. She lives with her parents
in a small apartment.
Meer Ali owns a successful fitness centre that employs about twenty people. He owns a large
house.
income spending
($ per month) ($ per month)
2600 2625
2900 2925
3200 3190
3500 3275
3800 3500
4100 3725
What is the first level of income shown at which savings are positive?
12 A survey of managers in the USA revealed that most businessmen feel that a company’s
responsibility is ‘to serve the interests of owners, employees, customers and the public’.
The idea of profit maximisation, in contrast, implies that a company’s main responsibility should
be to the
A customers.
B employees.
C owners.
D public.
14 A firm produced 200 cars a week and employed 50 workers. A fall in demand caused the firm to
reduce its output to 160 cars a week and its labour force to 32.
A It fell by 20%.
B It fell by 25%.
C It increased by 20%.
D It increased by 25%.
15 A firm has fixed costs of $100 for its daily output. The table shows its daily total variable costs.
output (units) 1 2 3 4
total variable costs ($) 200 360 500 720
A It falls continuously.
B It is highest at output 4 units.
C It is lowest at output 3 units.
D It rises continuously.
16 A government decides to sell the monopoly supply of gas to households to a private firm.
How could the government protect the interests of households after selling a large company to
the private sector?
17 A government decides to increase the rate of income tax and spend the extra revenue on
providing training colleges.
18 A government taxes farmers $12 per kilo when they supply food on the open market where X is
the original equilibrium position.
50
S4 S3 S1
S2
40
X
price 30
($ per kilo)
20
D1
10
0
10 20 30 40 50 60
quantity supplied
(000 kilos)
What will be the new equilibrium price and quantity supplied as a result of the tax?
A 20 40
B 25 50
C 35 30
D 40 20
19 The table shows taxes as percentages of Gross Domestic Product (GDP) for four countries.
From this information, which country had the lowest percentage of direct taxation as a percentage
of GDP?
tax on
income tax tax on tax on goods
business
% dividends % and services %
profits %
A 12 14 2 4
B 14 15 2 13
C 17 8 5 9
D 17 13 5 9
21 How is the pattern of employment likely to change when a country becomes more developed?
Which increase in the first indicator is most likely to lead to an increase in the second indicator?
24 What would be most likely to cause the population to decrease if other things remain constant?
25 Developed countries have a high and increasing proportion of their population over the age of 65.
Which economic consequence will be most likely to result from this kind of population change?
26 The chart shows total world carbon emissions in 1995 and predicted emissions by 2035.
1995 2035
other Asia
6%
developing developing
world world
27% 50%
other US
Latin
China US Asia
America 4% 15%
11% 22% 14% W.
Africa 3% China Europe
Middle East 17% 12%
W. Europe
3% 17% E. Europe
E. Europe 19%
Japan Africa
27%
7% 8%
Latin
America
developed 6% developed
world world
73% Middle Japan 50%
East 4%
5%
What would not be a reason why they might have chosen to do this?
30 In 2009 the exchange rate of the Singapore dollar changed from 1.49 = 1 US dollar to 1.43
Singapore dollars = 1 US dollar.
How would this affect the import prices and export prices for Singapore?
A decrease decrease
B decrease increase
C increase decrease
D increase increase
labour capital
A profit interest
B rent profit
C wages profit
D wages interest
3 The diagram shows a production possibility curve for maize and cotton.
maize P Q
R S
O cotton
A P to R B Q to R C S to Q D S to R
4 The market for a good was in equilibrium. A change occurred which resulted in a new equilibrium
with a higher price for the good and a lower quantity traded.
5 A demand curve shows the relationship between the quantity demanded and
A a change in income
B consumer tastes
C the supply of the product
D the price of the product
This is likely to
8 What might be a disadvantage to a trade union when arguing for an increase in its members’ pay?
income wealth
10 Nazmin Uddin works in a local office as a secretary three days a week. She lives with her parents
in a small apartment.
Meer Ali owns a successful fitness centre that employs about twenty people. He owns a large
house.
income spending
($ per month) ($ per month)
4000 4150
4300 4375
4600 4650
4900 4900
5200 4975
5500 5275
What is the first level of income shown at which savings are positive?
12 A survey of managers in the USA revealed that most businessmen feel that a company’s
responsibility is ‘to serve the interests of owners, employees, customers and the public’.
The idea of profit maximisation, in contrast, implies that a company’s main responsibility should
be to the
A customers
B employees
C owners
D public
14 A firm has fixed costs of $200 for its daily output. The table shows its daily total variable costs.
output (units) 1 2 3 4
A it falls continuously
B it is highest at output 4 units
C it is lowest at output 4 units
D it rises continuously
15 The table shows the growth rate of output (%) in four sectors of an economy.
Which two sectors showed an increase in the growth rate in the first half of 2014?
16 A government decides to sell the monopoly supply of gas to households to a private firm.
How could the government protect the interests of households after selling a large company to
the private sector?
17 In 2015, 70 000 extra people lost their jobs but total employment rose by 75 000. What could
explain this?
18 The table shows taxes as a percentage of Gross Domestic Product (GDP) for four countries.
From this information, which country had the highest percentage of direct taxation as a
percentage of GDP?
A 12 14 2 5
B 14 15 2 14
C 17 13 5 10
D 18 10 1 10
19 A government gives farmers a subsidy of $5 per kilo to supply food on the open market where X
is the original equilibrium position.
S3 S1
20 S2
X
15
price
($ per kilo) 10 D1
0
4 8 12 16 20 24
quantity supplied
(000 kilos)
What will be the new equilibrium price and quantity supplied as a result of the subsidy?
A 10 16
B 13 20
C 15 16
D 20 8
A a base year
B incomes
C price elasticity of products
D quantity supplied
21 Why is nominal Gross Domestic Product not a good measure to compare the standard of living in
a country between two years?
23 Some goods take a greater percentage of a typical household’s total spending than others.
25 A government introduces state benefits for the unemployed and increases the top rate of income
tax to pay for the benefits.
What effect will these changes have on poverty and the tax system?
26 The chart shows total world carbon emissions in 1995 and predicted emissions by 2035.
1995 2035
other Asia
6%
developing developing
world world
27% 50%
other US
Latin
China US Asia
America 4% 15%
11% 22% 14% W.
Africa 3% China Europe
Middle East 17% 12%
W. Europe
3% 17% E. Europe
E. Europe 19%
Japan Africa
27%
7% 8%
Latin
America
6% developed
developed world
world 50%
Middle Japan
73%
East 4%
5%
A Africa and the Middle East will have responsibility for the same amount of carbon emissions
in 2035 as in 1995.
B Between 1995 and 2035, the Middle East will have increased its industrialisation by as much
as Latin America.
C By 2035 the combined percentage of carbon emissions caused by Africa and Latin America
will have doubled.
D The US will have decreased its carbon emissions by a smaller percentage than Western
Europe.
What would not be a reason why they might have chosen to do this?
30 The table shows components of Japan’s current account balance in trillion Yen for 2011 and
2012.
1 A natural resource was discovered in a country. The exploitation of this resource allowed the
country to double its gross domestic product within ten years.
capital
goods
O
consumer
goods
decision 1 decision 2
A a school recruits more teachers a firm sets the prices for its products
B a central bank reduces money supply a government spends more on defence
C a government increases tax rates a farmer decides which crops to grow
D a household cuts its energy use a worker accepts an offer of overtime
A B
price S2 price S1
S1 S2
D
D
O O
quantity quantity
C D
price price S
S
D2 D1
D1 D2
O O
quantity quantity
7 The price elasticity of supply of good X is 0.1. The good suddenly becomes very fashionable,
leading to a large increase in demand.
What would be the likely outcome of this change in the short term?
10 The graph shows women’s wages as a percentage of men’s wages in year 1 and year 2.
85
percent 80
75 year 2
70
65
year 1
60
55
27 30 35 40 45 50 55 60 62
age
food leisure
A decrease decrease
B decrease increase
C increase decrease
D increase increase
12 A firm produces 1000 units and has a total cost of $50 000. The variable cost per unit produced is
$40.
ownership sector
A private secondary
B private tertiary
C public secondary
D public tertiary
A B
Y
military military
spending Y spending X
O non-military O non-military
spending spending
C D
Y
military military
spending X spending X
O non-military O non-military
spending spending
Which policy is most likely to lead to a fall in economic growth in the short run but an increase in
economic growth in the long run?
21 A government has a contractionary fiscal policy to reduce inflation. What will the government
increase?
A expenditure on infrastructure
B income tax rates
C personal tax allowances
D unemployment benefits
23 The table gives information about three economic indicators in four countries.
money
price level
incomes
A fell fell
B fell rose
C rose rose
D rose fell
25 In recent years some low-income countries have achieved higher rates of economic growth than
high-income countries.
26 Which changes usually result when a country develops and is able to provide free healthcare and
good living conditions?
labour
birth rate death rate
productivity
27 What are the effects on price and equilibrium quantity of the imposition of an import tariff on a
good?
A decreases decreases
B decreases increases
C increases decreases
D increases increases
28 Which change will not increase a surplus on the current account of the balance of payments of a
country?
29 An economy with a floating exchange rate experiences an increased deficit on the current
account of the balance of payments.
30 The table shows components of Japan’s current account balance in trillion Yen (¥) for 2011 and
2012.
A balance of goods
B balance of services
C balance of primary income
D balance of secondary income
1 In 2016, 20 billion barrels of oil and 1.6 billion barrels of natural gas were discovered in Texas,
US.
A capital
B enterprise
C labour
D land
Which of these points shows the largest possible output of product Y currently achievable?
product Y
A
B
C
O
product X
3 A student decides to take up a two year apprenticeship for which she will earn $10 000 per year.
After that she expects to earn $25 000 per year. She could take an unskilled job which pays
$16 000 per year instead of the apprenticeship.
What is the opportunity cost in the two years of completing the apprenticeship?
A many firms
B monopoly
C profit maximisation
D specialisation
6 The diagrams show the supply curve for an individual grower of tomatoes and for the total market
supply of tomatoes.
3.0 3.0
price price
per kg per kg
($) ($)
1.5 1.5
0.5 0.5
0 0
1000 3000 6000 100 000 300 000 600 000
quantity quantity
(kilograms) (tonnes)
7 The price of bread rose by 5% and the quantity demanded fell by 4%.
8 Saudi Arabia specialises in oil extraction and refining. This is a capital-intensive industry with
highly skilled labour.
A Oil companies have increased training costs as each worker needs many different skills.
B Oil companies may find it difficult to achieve economies of scale.
C Resource allocation is not efficient because a narrow range of goods is being produced.
D Workers may face a restricted range of job opportunities.
10 The graph shows women’s wages as a percentage of men’s wages in year 1 and year 2.
85
percent 80
75 year 2
70
65
year 1
60
55
27 30 35 40 45 50 55 60 62
age
food leisure
A decrease decrease
B decrease increase
C increase decrease
D increase increase
12 The table shows total fixed and total variable costs at different levels of output for a firm.
total total
output fixed cost variable cost
$ $
14 Which statement proves there has been an increase in productivity for a factory making tractors?
A 10% more workers results in a 10% increase in tractors produced each week.
B Output per worker increases from 3 tractors to 4 tractors per month.
C Production increases as more workers are hired.
D Starting a night shift leads to an increase in production of 10 tractors a day.
A inheritance tax
B profits tax
C sales tax
D value added tax
20 Information about job vacancies on a government website has led to a decrease in short-term
unemployment.
A cyclical unemployment
B frictional unemployment
C structural unemployment
D technological unemployment
100 101 99 98
A quarters 1 and 2
B quarters 2 and 3
C quarters 3 and 4
D the entire period
23 The table gives information about three economic indicators in four countries.
25 Which country would be classified as the most developed based on the data in the table?
gross domestic
population
country product per year
(millions)
($m)
A 600 3
B 700 2
C 12 000 40
D 15 000 100
26 Which changes usually result when a country develops and is able to provide free healthcare and
good living conditions?
labour
birth rate death rate
productivity
27 Which protectionist measure would be most suitable for a government to use to support the
growth in exports of an industry?
A embargo
B quota
C subsidy
D tariff
28 There has been an appreciation of the value of a country’s currency against other currencies.
What effects will this have on prices of imports of raw materials and prices of exports of
manufactured goods?
A cheaper cheaper
B cheaper more expensive
C more expensive cheaper
D more expensive more expensive
30 The table shows components of Japan’s current account balance in trillion Yen (¥) for 2011 and
2012.
A balance of goods
B balance of services
C balance of primary income
D balance of secondary income
3 The diagram shows a production possibility curve (PPC) for an economy that can produce cotton
and cars. The economy is at point Q.
W
output Z
of cotton
Q X
O
output of cars
There is improved technology that can only be used in the production of cars.
A by a movement from Q to W
B by a movement from Q to X
C by a movement from Q to Y
D by a movement from Q to Z
A economic growth
B elasticity of demand
C inflation
D the balance of payments
S1
P2
price
P1
P3
D1
O Q2 Q3 Q1 Q4 Q5
quantity
7 Lithium is an essential metal for the production of electric cars. Following a 10% increase in the
price of lithium, supplies increase by 15%. This led to a 5% increase in the price of
electric cars.
influence 1 influence 2
10 The graph shows women’s wages as a percentage of men’s wages in year 1 and year 2.
85
percent 80
75 year 2
70
65
year 1
60
55
27 30 35 40 45 50 55 60 62
age
food leisure
A decrease decrease
B decrease increase
C increase decrease
D increase increase
12 The table shows total fixed and total variable costs at different levels of output for a firm.
total total
output
fixed cost variable cost
(tonnes)
($) ($)
20 The table shows selected indicators for the labour market of an economy in 2014 and 2018.
2014 2018
(millions) (millions)
According to the table, what is the most likely type of unemployment in 2018?
A cyclical
B frictional
C seasonal
D structural
A higher imports
B higher levels of resources
C higher taxation
D higher unemployment
23 The table gives information about three economic indicators in four countries.
25 An additional 700 000 UK children and pensioners fell into relative poverty between 2013 and
2017.
26 Which changes usually result when a country develops and is able to provide free healthcare and
good living conditions?
labour
birth rate death rate
productivity
28 Many low-income countries rely on exports of raw materials such as coffee or iron ore to earn
them foreign currency.
30 The table shows components of Japan’s current account balance in trillion Yen (¥) for 2011 and
2012.
A balance of goods
B balance of services
C balance of primary income
D balance of secondary income
2 What would cause an outward shift of a country’s production possibility curve (PPC)?
A a fall in unemployment
B an increase in the rate of income tax
C an increase in the labour force
D a reduction in expenditure on education
3 In recent years more golf courses, which use large quantities of water, have opened in China.
A cost of water
B loss of farmland
C sales of golf equipment
D wages of golf course staff
5 China has built a new railway in Kenya from the capital, Nairobi, to the seaport of Mombasa.
Kenya must repay the cost of the railway to China. Journey time has been reduced significantly
but fares have increased and farmers have lost agricultural land along the new line.
What happens to the demand for a product if its price falls from $1 to $0.80?
A It decreases by 10%.
B It decreases by 20%.
C It increases by 10%.
D It increases by 20%.
9 Which advantage do coins have that make them more suitable than banknotes to act as money?
10 What is the most important factor that affects how much a family saves?
11 The table shows the change in real incomes for a number of occupations between 1985 and
2015.
change in
occupation real income
%
doctors 153
lawyers 114
accountants 60
bricklayers 37
bus and coach drivers 19
fork-lift truck drivers –5
A co-operative
B multinational
C public limited company
D sole trader
14 The diagram shows the fixed costs, variable costs and total costs of a firm.
costs
W
O Z
output
A WX B WY C XY D XZ
15 An entrepreneur buys a workshop for $200 000 to make plastic boxes. In the first year of
operation he spends $70 000 on materials, employs ten production workers paid by the amount
produced (piece rate) at a total cost of $80 000 and buys two delivery vehicles for $10 000 each.
16 Which form of taxation always takes an increasing percentage of the taxpayer’s income as it
rises?
A indirect
B progressive
C proportionate
D regressive
17 What is the most likely effect of a government reducing the money supply?
18 Sometimes the government regulates the market to protect the interests of consumers.
19 The diagram shows percentage (%) changes in prices and wages over time.
2.0 prices
% change
in wages 1.5
and prices
1.0
0.5
wages
0
2000 2005 2010 2015
year
A gender inequality
B life expectancy at birth
C political freedom
D the impact of pollution
22 What is most likely to have caused a long-term decrease in the numbers employed in the banking
sector of an economy?
24 Which action might be taken by an economy wishing to produce a greater range of products?
25 Given the following information, which country is most likely to have the highest standard of
living?
A Bangladesh 27 10 58 93
B Bhutan 36 14 53 107
C Botswana 31 21 40 57
D Brunei 25 5 72 22
27 The US government decides to reduce the size of the quota on a good it buys from China.
28 Changes in the foreign exchange rate of a country resulted in a depreciation of its currency.
29 Which item will register as an outflow on the services section of the current account of the US
balance of payments?
What is likely to have happened to the price of agricultural products and the volume of imports of
agricultural products?
A fall fall
B fall rise
C rise fall
D rise rise
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goods
O services
3 In recent years more golf courses, which use large quantities of water, have opened in China.
A cost of water
B loss of farmland
C sales of golf equipment
D wages of golf course staff
6 A newspaper reported that ‘The world market for coffee has returned to equilibrium’.
7 The table shows the demand schedule for a good at different prices.
price quantity
$ demanded
8 200
10 160
12 120
14 60
Following a 20% increase in price, what will be the change in the quantity demanded?
A – 60 B – 40 C +120 D +200
8 Carlos has been offered a new job with a large multinational company. He is undecided whether
to accept the position.
A bonus payments
B holiday entitlement
C overtime rate
D salary level
9 Unlike the UK and US, a significant proportion of the shares on the stock exchanges of China and
Russia are of state-owned enterprises.
Which judgement about China and Russia can be made from this information?
10 What is the most important factor that affects how much a family saves?
11 The table shows the change in real incomes for a number of occupations between 1985 and
2015.
change in
occupation real income
%
doctors 153
lawyers 114
accountants 60
bricklayers 37
bus and coach drivers 19
fork-lift truck drivers –5
A conglomerate
B horizontal
C vertical backwards
D vertical forwards
13 Why is the energy supply industry dominated by very large firms in many economies?
14 The diagram shows the fixed costs, variable costs and total costs of a firm.
costs
W
O Z
output
A WX B WY C XY D XZ
15 An entrepreneur buys a workshop for $200 000 to make plastic boxes. In the first year of
operation he spends $70 000 on materials, employs ten production workers paid by the amount
produced (piece rate) at a total cost of $80 000 and buys two delivery vehicles for $10 000 each.
16 A government increases the rate of income tax in order to pay for extra transfer payments,
including cash benefits to the poor.
17 The standard rate for Value Added Tax (sales tax) is 20% in a country. Different consumers
buying the same product have to pay the same amount of tax.
A direct
B progressive
C proportional
D regressive
18 The diagram shows the demand curve D1 and supply curve S1 for a good. The government
introduces a subsidy to encourage production.
price S1
$ S2
30
25
20
D1
0 4 5
quantity
21 What would not increase the Human Development Index (HDI) of a country?
23 The table shows the percentage change from 2015–2016 in gross domestic product (GDP) and
consumer prices for selected countries.
25 Given the following information, which country is most likely to have the highest standard of
living?
A Bangladesh 27 10 58 93
B Bhutan 36 14 53 107
C Botswana 31 21 40 57
D Brunei 25 5 72 22
27 The US government decides to reduce the size of the quota on a good it buys from China.
29 In 2013, the European Union (EU) levied a 48% tariff on low-priced Chinese solar panels
because the low price was the result of subsidies from the Chinese government.
What is likely to have happened to the price of agricultural products and the volume of imports of
agricultural products?
A fall fall
B fall rise
C rise fall
D rise rise
1 A government wishes to increase agricultural output. It gives farmers the tools to irrigate the
farmers’ fields.
2 The diagram shows a production possibility curve (PPC) for an economy that produces both
capital goods and consumer goods.
At which point will the economy show the highest potential for sustained long run economic
growth?
D
consumer
goods
C
O
capital goods
3 In recent years more golf courses, which use large quantities of water, have opened in China.
A cost of water
B loss of farmland
C sales of golf equipment
D wages of golf course staff
5 An airline upgrades its services by providing bigger aircraft. The airline claims it will reduce
catering waste and lower carbon (CO2) emissions per passenger journey although fares may rise.
6 What can be concluded from the demand curve for the product shown in the diagram?
price demand
0 20 40
quantity
7 A mobile (cell) phone operator increases the price of making calls on its network. After the price
increase, the revenue of the mobile phone operator falls by 10%.
What is the price elasticity of demand (PED) for the mobile operator’s service?
A elastic
B inelastic
C perfectly elastic
D unit elastic
9 In recent years some central banks have reduced interest rates below 1% per year.
10 What is the most important factor that affects how much a family saves?
11 The table shows the change in real incomes for a number of occupations between 1985 and
2015.
change in
occupation real income
%
doctors 153
lawyers 114
accountants 60
bricklayers 37
bus and coach drivers 19
fork-lift truck drivers –5
14 The diagram shows the fixed costs, variable costs and total costs of a firm.
costs
W
O Z
output
A WX B WY C XY D XZ
15 An entrepreneur buys a workshop for $200 000 to make plastic boxes. In the first year of
operation he spends $70 000 on materials, employs ten production workers paid by the amount
produced (piece rate) at a total cost of $80 000 and buys two delivery vehicles for $10 000 each.
S2
price
S1
U V W
X Y Z
D1
O Q2 Q1
quantity
Which area represents the part of the tax paid by consumers of the product?
A U+V
B U+V+W
C U+V+X+Y
D U+X
20 The table shows possible sequences between the rate of interest and other economic variables.
21 Why is the Human Development Index (HDI) a better measure of living standards than GDP per
head?
23 In January 2016 the rate of inflation in a country changed from 3% to 2%. In March 2016 the rate
of inflation was 4%.
January March
A fell fell
B fell rose
C rose fell
D rose rose
25 Given the following information, which country is most likely to have the highest standard of
living?
A Bangladesh 27 10 58 93
B Bhutan 36 14 53 107
C Botswana 31 21 40 57
D Brunei 25 5 72 22
27 The US government decides to reduce the size of the quota on a good it buys from China.
28 The world demand for oil is price-inelastic and oil is paid for in US dollars.
If the price of oil falls rapidly, how might it affect the exchange rate of the US dollar?
What is likely to have happened to the price of agricultural products and the volume of imports of
agricultural products?
A fall fall
B fall rise
C rise fall
D rise rise
1 The introduction of robots has meant that many firms now require fewer workers to produce their
goods and services.
A capital
B enterprise
C labour
D land
2 Economics textbooks identify the existence of scarcity as the basic economic problem.
X
manufactured
goods
O X Y
agricultural
goods
What could cause the country’s production possibility curve to move from XX to XY?
5 The diagram shows the demand curve D1 and supply curve S1 for healthcare in an economy. The
original equilibrium is X.
What will be the new equilibrium if the economy experiences sustained economic growth and the
government reduces planning controls on the building of new hospitals?
S2
price
S1
S3
A
D B
X
C
D2
D1
D3
O quantity
6 A private firm is one of a few suppliers of electricity in an economy. It is fined by the government
for pollution from its coal-fired power stations which affect the health of those living nearby.
S
price
($) 4
0 10 20 30
quantity (units)
What is the price elasticity of supply when the price rises from $2 to $4?
A 0.2 B 0.5 C 1 D 2
9 Which change will make a manufacturing company replace labour with capital to maintain the
most efficient combination of factors of production?
10 What is the most likely reason a firm might welcome the introduction of a trade union for its
workers?
13 A television manufacturer claims to have the most technically advanced production in the
industry.
What is this most likely to mean when compared with its rival producers?
14 A firm that sells its product for $6 a unit has the following total costs.
output (units) 0 10 20 30
total costs ($) 40 100 120 150
16 In many countries the government provides financial help to firms who wish to produce electricity
using wind turbines.
A deregulation
B maximum price
C subsidy
D taxation
A income tax
B interest rates
C stable prices
D unemployment
19 Which situation involving the building industry is most likely to be investigated by a government
body set up to control restrictive practices?
22 There was a fall in investment spending by businesses in the third quarter of 2015.
23 The table shows units of output, value of output and number of people employed in an industry
over three years.
year 1 10 10 5
year 2 21 25 7
year 3 32 40 8
24 Provision of services in rural districts of developing countries tends to occur later than those in
urban areas.
25 The table shows a country’s past and predicted age structure, as a percentage (%), from
2000 to 2150. The working age range is 15 – 64.
65 and over 7 14 25 28
15 – 64 63 68 60 56
14 and under 30 18 15 16
Which statement describes the behaviour of the dependency ratio over the period?
26 The government of a developing country allows a multinational mining company to mine minerals
in order to improve the standard of living of the local people.
Which action by the multinational company (MNC) will not lead to an improvement in the
standard of living of the local people?
27 What would have the most severe restriction on the volume of international trade in steel?
A an embargo
B a licence system
C a quota
D a tariff
28 In 2012 the UK held the Olympic Games, which attracted a large number of visitors from foreign
countries.
Which item of the UK’s current account balance will have benefited directly from this event?
$bn
rice yield
country
(kilos per hectare)
Japan 64
China 53
Bangladesh 20
Thailand 20
Which position is most likely to lead to the greatest outward shift of the PPC?
consumer
goods
B
A
C
D
O
capital goods
4 What is a major advantage of a market economic system over a mixed economic system?
5 The diagram shows the market for beef in the US with the original equilibrium at X.
S3
price S1
S2
B C
X
A
D
D2
D1
D3
O
quantity
6 The table shows government estimates of the private and external benefits and costs of building
a new dam.
$ million
What is the difference between the social benefits and social costs of building the dam?
S
price
($) 4
0 10 20 30
quantity (units)
What is the price elasticity of supply when the price rises from $2 to $4?
A 0.2 B 0.5 C 1 D 2
A cash
B bonds
C loans
D mortgages
10 What is most likely to help a trade union’s claim for wage increases in an industry?
salary 40 000
fees earned from consultancy 15 000
credit card repayment 5 000
Income tax is fixed at 20%. The engineer saved 10% of the disposable income.
A absence of competitors
B non-price competition
C one dominant firm
D price taker
14 A firm that sells its product for $6 a unit has the following total costs.
output (units) 0 10 20 30
total costs ($) 40 100 120 150
A income tax
B interest rates
C stable prices
D unemployment
revenue
($ m)
19 Which situation involving the building industry is most likely to be investigated by a government
body set up to control restrictive practices?
20 The table shows the change in Gross Domestic Product (GDP) of four countries.
22 There was a fall in investment spending by businesses in the third quarter of 2015.
23 The table shows units of output, value of output and number of people employed in an industry
over three years.
year 1 10 10 5
year 2 21 25 7
year 3 32 40 8
25 Over two-thirds of the world’s poorest people live in rural areas. They are mainly involved in
subsistence agriculture.
What explains why poverty remains at a high level for subsistence farming families?
26 The government of a developing country allows a multinational mining company to mine minerals
in order to improve the standard of living of the local people.
Which action by the multinational company (MNC) will not lead to an improvement in the
standard of living of the local people?
28 In 2012 the UK held the Olympic Games, which attracted a large number of visitors from foreign
countries.
Which item of the UK’s current account balance will have benefited directly from this event?
29 In 2015, the value of the South African currency (the rand) depreciated against the US dollar.
rice yield
country
(kilos per hectare)
Japan 64
China 53
Bangladesh 20
Thailand 20
1 The Norwegian government chose to spend the profits from oil on stocks, bonds and property.
The possibility of improving domestic infrastructure, therefore, was not taken.
A cost of production
B finite resources
C opportunity cost
D production possibility frontier
A assembling computers
B giving legal advice
C harvesting grain
D making bread
5 In the diagram, suppliers have set the price of a product at PS. Economic theory predicts that the
equilibrium price of the product will rise to PE.
S
price
PE
PS
D
O
quantity
6 A government approved the construction of a new railway line connecting major cities. It would be
built by a private company but be funded partly through taxation. It would create many jobs.
People living on the route worried about the harm to their environment.
S
price
($) 4
0 10 20 30
quantity (units)
What is the price elasticity of supply when the price rises from $2 to $4?
A 0.2 B 0.5 C 1 D 2
10 When is a trade union likely to have more power to increase its members’ wages?
11 The table shows the percentage (%) of income saved by different age groups.
A Over the age range shown total savings equalled total dissavings.
B The 15–29 age group has the lowest level of income.
C The 50–64 age group saves the highest percentage of its income.
D The 65+ age group has a lower income than the 30–39 age group.
A freedom of entry
B many buyers
C many sellers
D perfectly elastic demand curve
What will be happening to long run average cost and total cost?
long run
total cost
average cost
A decreasing decreasing
B decreasing increasing
C increasing decreasing
D increasing increasing
14 A firm that sells its product for $6 a unit has the following total costs.
output (units) 0 10 20 30
total costs ($) 40 100 120 150
A government spending
B the money supply
C the rate of interest
D unemployment benefit
A income tax
B interest rates
C stable prices
D unemployment
18 The table shows the amount of tax to be paid at different weekly incomes.
Which statement describes the system of income tax as income rises over this range?
A It is progressive throughout.
B It is proportional then becomes progressive.
C It is proportional then becomes regressive.
D It is regressive throughout.
19 Which situation involving the building industry is most likely to be investigated by a government
body set up to control restrictive practices?
A budget deficit
B inflation
C recession
D trade deficit
22 There was a fall in investment spending by businesses in the third quarter of 2015.
23 The table shows units of output, value of output and number of people employed in an industry
over three years.
year 1 10 10 5
year 2 21 25 7
year 3 32 40 8
25 Which characteristic will show that a country has significant absolute poverty?
26 The government of a developing country allows a multinational mining company to mine minerals
in order to improve the standard of living of the local people.
Which action by the multinational company (MNC) will not lead to an improvement in the
standard of living of the local people?
27 A country has decided that it wants to increase free trade with its trading partners.
28 In 2012 the UK held the Olympic Games, which attracted a large number of visitors from foreign
countries.
Which item of the UK’s current account balance will have benefited directly from this event?
29 The Mexican currency (the peso) has fallen in value against the US dollar.
rice yield
country
(kilos per hectare)
Japan 64
China 53
Bangladesh 20
Thailand 20
What is the opportunity cost if the person decides to paint a picture instead?
A 10 craft items
B the cost of the materials for the craft items
C the cost of the paint for the picture
D the value of the picture
3 The diagram shows a production possibility curve for agriculture and machinery.
agriculture L
K
N
M
O
machinery
As a country develops, its primary production decreases and its secondary production increases.
A K to L B L to N C M to N D N to L
4 The table shows four people’s demand for t-shirts at two prices.
10 4 6 3 5
15 2 3 1 4
Who has the most elastic demand for t-shirts when the price rises from $10 to $15?
A Elsa
B George
C Hamid
D Shara
price
X
D
O
quantity demanded
per week
A a change in tastes
B a fall in the price of chocolate
C an increase in income
D a successful advertising campaign for chocolate
6 A company produces an electric car that can be driven much further than other electric cars
without needing recharging. The car does not emit the dangerous fumes that petrol cars do. The
batteries that power the car are very expensive and the company is building a huge factory to
produce batteries more cheaply.
7 People often eat biscuits when they drink a cup of tea. Between 2010 and 2015, the consumption
of sweet biscuits decreased because of health warnings about high sugar consumption. Sales of
tea, as a result, also fell.
How would this be shown on demand and supply diagrams for biscuits and tea?
biscuits tea
8 A student needs to borrow $60 000 to pay for a five-year university course in medicine.
What would motivate the student to borrow to pay for the course?
9 The Congress of South African Trade Unions (COSATU) is the biggest union federation in South
Africa. It represents public sector workers.
In 2010, it had an increase in membership. In the same year, COSATU’s bargaining strength
declined.
10 Which worker is most likely to risk facing a falling income towards the end of their career?
11 What is the most likely reason why airline pilots earn more than agricultural workers?
12 To achieve horizontal integration, a firm producing tyres could merge with another firm producing
A motor cars.
B rubber.
C tyre-producing machinery.
D tyres.
13 A car manufacturer has a highly mechanised assembly line using robots and a few skilled
workers. An international exam board employs many thousands of examiners to mark candidates’
examination papers.
A capital-intensive capital-intensive
B capital-intensive labour-intensive
C labour-intensive capital-intensive
D labour-intensive labour-intensive
What is not likely to be true about a monopoly compared with a competitive firm?
15 The table shows the total costs of a firm. It can sell the units for $10 each.
A 7 B 8 C 9 D 10
17 Why can government spending be described both as a fiscal policy and a supply-side policy?
A It has a nationwide effect and can control firms’ production possibility curves.
B It is announced in the budget and can increase the economy’s ability to produce.
C It is determined by the central bank and can raise the cost of production of firms.
D It must equal tax revenue and can regulate the amount of the money supply.
18 In trying to achieve one of its aims a government may make it difficult to achieve another aim.
A Achieving a more even distribution of income may prevent a rise in the average standard of
living.
B Achieving an increase in economic growth may prevent full employment.
C Achieving full employment may prevent stable prices.
D Achieving stable prices may prevent a current account surplus on the balance of payments.
What effect is this likely to have on tax evasion and revenue from indirect taxes?
revenue from
tax evasion
indirect taxes
A decrease increase
B decrease no effect
C increase increase
D increase no effect
20 A newspaper reported that a country’s economy had grown by 3% during the last year.
A costs of production
B gross domestic product
C unemployment
D wage levels
percentage change
year
on previous year (%)
2011 4
2012 5
2013 3
2014 2
24 What is likely to show that a country has a rising level of economic development?
25 The diagram shows population projections until the year 2075 for selected areas.
12
billion
10 Africa
8
other Asia
6
India
4
China
2 Latin America
developed countries
0
1950 2000 2050 2075
Assuming no migration, which situation must exist if the population is to change in the manner
shown in the diagram?
26 A government in a developing country has given extra funds to promote trade in rural areas by
encouraging the establishment of small shops.
A devaluation
B embargoes
C quotas
D tariffs
29 The currency exchange rate of the South African rand for the Botswana pula fell by 5.7%
between August 2014 and August 2015.
30 In 2015, China was the world’s biggest importer of oil. In August 2015, China devalued its
currency.
A The price of China’s exports fell and world oil prices rose as China’s demand decreased.
B The price of China’s exports rose and world oil prices fell as China’s demand increased.
C The price of China’s imports fell and world oil prices rose as China’s demand increased.
D The price of China’s imports rose and world oil prices fell as China’s demand decreased.
A a farm
B a farmer
C a farmer’s bank account
D a second-hand tractor
3 The diagram shows a production possibility curve for cars and furniture.
W
cars
X
Y Z
O furniture
A X to W B X to Y C Z to W D Z to Y
4 In response to an increase in price from $5 per kilo to $6 per kilo a chicken farmer increased
supply from 400 kilos to 500 kilos per week.
price
X
D
O
quantity demanded
per week
A a change in tastes
B a fall in the price of chocolate
C an increase in income
D a successful advertising campaign for chocolate
6 A bee-keeper maintains hives of bees to produce honey. The bees can pollinate neighbours’ fruit
trees but also give a painful sting to gardeners.
If both of these events occur, how will costs and benefits be affected?
7 In 2015 there was a significant fall in the world price of petrol (gasoline).
9 What is most likely to be used to support a claim for wage increases in an industry?
10 The government increases the rate of income tax and decreases the rate of a sales tax (VAT).
From the initial equilibrium point of X, which letter indicates the new equilibrium point in a market
for normal goods?
price
S1
B
A S
X
S2
C
D
D1 D D2
O quantity
11 In South Africa, the number of skilled workers is relatively low. However, average wages in South
Africa are double the average wage in Brazil and Turkey and they are 1.6 times higher than in
Malaysia.
12 To achieve horizontal integration, a firm producing tyres could merge with another firm producing
A motor cars.
B rubber.
C tyre-producing machinery.
D tyres.
What is not likely to be true about a monopoly compared with a competitive firm?
10 15 85
20 25 95
30 35 105
40 45 115
17 A government wishes to try to make the distribution of income in the country more equal.
18 In trying to achieve one of its aims a government may make it difficult to achieve another aim.
A Achieving a more even distribution of income may prevent a rise in the average standard of
living.
B Achieving an increase in economic growth may prevent full employment.
C Achieving full employment may prevent stable prices.
D Achieving stable prices may prevent a current account surplus on the balance of payments.
19 Which policy combination will be the most effective if a government wishes to increase the level
of employment?
20 A newspaper reported that a country’s economy had grown by 3% during the last year.
A costs of production
B gross domestic product
C unemployment
D wage levels
23 What is the change in GDP per head, after taking account of price increases (real change),
between 2000 and 2013?
24 Which statement about the poorest families in developing economies is not likely to be correct?
25 The diagram shows population projections until the year 2075 for selected areas.
12
billion
10 Africa
8
other Asia
6
India
4
China
2 Latin America
developed countries
0
1950 2000 2050 2075
Assuming no migration, which situation must exist if the population is to change in the manner
shown in the diagram?
A 20 49 380
B 35 49 350
C 40 53 350
D 45 63 450
A devaluation
B embargoes
C quotas
D tariffs
A free trade
B inefficiencies in production
C labour immobility
D tariffs
29 In 2015, Russia banned the imports of food, such as milk, from the European Union (EU).
30 In 2010, Vietnam experienced a deficit in the value of its trade in goods (visible) despite exporting
a greater number of goods than it imported.
A The average price of its goods imported exceeded the average price of its goods exported.
B The average value of its goods exported exceeded the average value of its goods imported.
C The country had a deficit on its trade in services.
D The country’s government imposed tariffs on imports.
1 Which combination of terms gives the general definition of the economic problem?
2 Helium is a gas that is limited in supply. It takes thousands of years to form from decaying
radioactive rocks. The US government holds 35% of the world’s supply and has been selling its
stocks. Helium is essential in medical scanners. It is also used for party balloons which some say
is a wasteful alternative use of a valuable good.
Which point on the diagram is the most efficient for the economy to produce both consumer
goods and capital goods?
capital A
goods
C
B
D
O
consumer goods
S
price
W X
Z Y
D
O quantity
price
X
D
O
quantity demanded
per week
A a change in tastes
B a fall in the price of chocolate
C an increase in income
D a successful advertising campaign for chocolate
6 A football club raises all stadium seat prices by 5%. The stadium is divided into four zones. The
demand for seats falls by 1% in zone W, by 3% in zone X, by 5% in zone Y and by 6% in zone Z.
In which zone is the responsiveness of demand for seats to the price change elastic?
A zone W
B zone X
C zone Y
D zone Z
7 A project to build one of the world’s biggest coal mines was planned in Australia. The project was
estimated to cost $US12.5 million. It would create employment but threaten endangered species
as large coal ships would damage the Great Barrier Reef.
What effects would this project have on the following costs and benefits?
9 In which type of work are employees most likely to earn their highest income at a relatively young
age?
10 Individuals produced their own goods. They then decided to specialise. They formed a group and
offered their skills to each other but without the use of money.
11 Tea is a very popular drink in Turkey and Morocco but coffee is an alternative drink preferred by
many people. Many cafés provide a small biscuit with either a cup of tea or coffee. Some people
put sugar in the drinks to sweeten them.
12 To achieve horizontal integration, a firm producing tyres could merge with another firm producing
A motor cars.
B rubber.
C tyre-producing machinery.
D tyres.
A a new bus
B diesel fuel
C loan repayment
D rent
What is not likely to be true about a monopoly compared with a competitive firm?
15 The table shows how a firm’s production changes as it employs more workers.
number of workers 10 20 30 40
total production (kilos) 50 100 300 600
17 A government intends to improve skills by offering free training to school leavers at age 16 until
they reach 18 years. It proposes to pay for this by taxing the profits of firms.
A fiscal fiscal
B monetary monetary
C supply-side fiscal
D supply-side monetary
18 In trying to achieve one of its aims a government may make it difficult to achieve another aim.
A Achieving a more even distribution of income may prevent a rise in the average standard of
living.
B Achieving an increase in economic growth may prevent full employment.
C Achieving full employment may prevent stable prices.
D Achieving stable prices may prevent a current account surplus on the balance of payments.
19 The charts relate to the Financial Statement of the government of New Zealand for 2014.
sales of goods
state
and services other enterprises
tax from 18% $21.0b $20.7b
incomes
31%
$89.4 other $92.2
billion (b) revenue billion (b)
total 14% total
revenue expenses education
health $12.3b
$14.9b
corporate
tax goods and
10% other services tax welfare
taxes 18% $23.3b
9%
A Expenditure on welfare was higher than the combined expenditure on education and health.
B The government was $2.8 billion in surplus.
C The largest source of the government’s income was from direct taxation.
D The number of business corporations was very small.
20 A newspaper reported that a country’s economy had grown by 3% during the last year.
A costs of production
B gross domestic product
C unemployment
D wage levels
21 A country has a low GDP and a large population but ranks relatively highly on the HDI.
A high high
B high low
C low low
D low high
money
price level
incomes
A fell fell
B fell rose
C rose unchanged
D rose fell
25 The diagram shows population projections until the year 2075 for selected areas.
12
billion
10 Africa
8
other Asia
6
India
4
China
2 Latin America
developed countries
0
1950 2000 2050 2075
Assuming no migration, which situation must exist if the population is to change in the manner
shown in the diagram?
% of labour force
GDP per head
life expectancy in service
($)
industries
A 51 250 48
B 51 400 52
C 61 450 52
D 61 400 40
A devaluation
B embargoes
C quotas
D tariffs
29 In recent years, the US has experienced a deficit on its overall current account of the balance of
payments.
30 In 2015, China was the world’s largest exporter of manufactured goods and a major importer of
oil and minerals. China devalued the yuan (renminbi) by 2%.
According to economic theory, what would have been a consequence of this devaluation?
1 What economic concept must be at work when there is movement by a country along its
production possibility curve?
A economies of scale
B equilibrium price
C maximum profit
D opportunity cost
2 The diagram shows the choices for an individual between leisure and earnings.
24
20
16
hours of leisure 12 X
per day
Y
8
0
20 40 60 80 100 120
earnings $
The person decides to take a job that gives more leisure time.
What is the opportunity cost to the individual of moving from position Y to position X?
A $20
B $80
C 4 hours of leisure per day
D 12 hours of leisure per day
6 Developers want to increase the size of a major retail shopping area in a city. It is thought that the
proposal would create hundreds of jobs, be profitable for the shops but cause major traffic
congestion.
7 The diagram shows the price of a product during year 1 and year 2.
price
($)
O year 1 year 2
Which changes in demand and supply are consistent with the price behaviour in year 2?
demand supply
9 When will a central bank act as lender of last resort to a commercial bank?
10 In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour. W indicates a
legal minimum wage.
An influx of immigrant labour causes the supply curve for labour to shift from S1S1 to S2S2.
D1 S1
S2
W
wage
($)
S1 D1
S2
0 1 2 3 4 5 6 7 8 9 10
labour (millions)
How many people will be employed if the minimum wage legislation is then abolished?
For these three people, what is the most likely order of income, from lowest income to highest
income?
A X→Y→Z
B Y→X→Z
C Y→Z→X
D Z→X→Y
A by maximising the difference between its total revenue and total cost
B by maximising the number of goods that it sells
C by minimising the number of goods that it keeps in stock
D by minimising the difference between average revenue and average cost
14 The table shows the units of factors of production that a firm needs to employ for two different
levels of output.
6 8 4 100
9 12 6 200
15 By 2014, government subsidies for the Chinese steel industry led to 200 million tonnes of excess
output.
Which would represent the position after the subsidy but before the market adjusted?
A B
price price
($) ($)
C D
price price
($) ($)
17 A government fixes the rate of income tax at $0.20 per dollar earned.
A indirect
B progressive
C proportional
D regressive
$m
21 A country has a very high Gross Domestic Product and a small population but has a low standard
of living.
A There is a high inequality of income distribution and a high provision of merit goods.
B There is a high inequality of income distribution and a limited provision of merit goods.
C There is equality of income distribution and a high provision of merit goods.
D There is equality of income distribution and a low provision of merit goods.
22 The table gives information about three economic indicators in four countries.
23 The weight for a product in the consumer price index was increased.
24 China is classified as a developing country. Recently, contributions to its Gross Domestic Product
(GDP) were agriculture 10%, construction 13%, manufacturing 32% and services 45%.
Which contribution to GDP usually decreases first when countries move to a higher level of
development?
A agriculture
B construction
C manufacturing
D services
25 Some people think that the debts and interest payments of the poorest countries in the world
should be cancelled.
What might be a disadvantage for the poorest countries if this were done?
infant mortality
birth rate death rate life expectancy
rate
A 41 20 31 49
B 32 14 29 59
C 25 6 25 79
D 25 5 22 79
27 What might cause the balance on the current account of Mauritius to improve?
29 It has been suggested that all countries producing arms should ban the export of weapons and
cut production in order to reduce the risk of war.
30 The US currently trades in oil with the UK. The discovery of new oil and gas deposits in the US
will mean that its oil imports decrease and its oil exports increase.
From the initial equilibrium point of X, which letter indicates the new equilibrium point for the US
exchange rate?
S1
B
A S
price
of $ X S2
C
D
D1 D D2
O
quantity of $
2 Which firm is likely to find it most difficult to expand the use of its main factor of production?
3 The diagram shows the choices for an individual between leisure and earnings.
18
15
12
hours of leisure X
9
per day
Y
6
0
10 20 30 40 50 60
earnings $
What is the opportunity cost to the individual of the extra earnings when moving from position X
to position Y?
A $10
B $40
C 3 hours of leisure per day
D 6 hours of leisure per day
6 Developers want to increase the size of a major retail shopping area in a city. It is thought that the
proposal would create hundreds of jobs, be profitable for the shops but cause major traffic
congestion.
7 The diagram shows demand and supply curves for a product. Initially the market is in equilibrium
at point X.
What would be the new equilibrium point if the costs of production fell and a rumour circulated
that the product could become unsafe in extreme weather conditions?
A X C
price
O quantity
A It issues currency.
B It offers overdraft facilities to individuals.
C It operates deposit accounts.
D It raises taxation.
10 In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour. W indicates a
legal minimum wage.
An influx of immigrant labour causes the supply curve for labour to shift from S1S1 to S2S2.
D1 S1
S2
W
wage
($)
S1 D1
S2
0 1 2 3 4 5 6 7 8 9 10
labour (millions)
How many people will be employed if the minimum wage legislation is then abolished?
For these three people, what is the most likely order of income, from lowest income to highest
income?
A Y→X→Z
B Y→Z→X
C Z→X→Y
D Z→Y→X
A by maximising the difference between its total revenue and total cost
B by maximising the number of goods that it sells
C by minimising the number of goods that it keeps in stock
D by minimising the difference between average revenue and average cost
14 A manufacturing firm increases the scale of its production. Its average total cost curve in the long
run (LRAC) is shown below.
At which point on the LRAC curve is the firm experiencing diseconomies of scale?
A LRAC
cost D
B C
O output
15 The table shows the units of factors of production that a firm needs to employ for two different
levels of output.
4 3 5 20
8 6 10 40
17 When a government aims to encourage economic growth it may adopt supply-side policies.
$m
19 Which policy combination will be the most effective if a government wishes to increase the level
of employment?
21 Which measures, in addition to Gross Domestic Product per capita, are included in the Human
Development Index?
22 The table gives information about three economic indicators in four countries.
23 Which type of government policy would be most suitable to control external costs of production?
A employment policy
B fiscal policy
C monetary policy
D trade policy
24 The diagrams show birth rate (BR) and death rate (DR) in three countries, X, Y and Z, in two
years, 1 and 2.
X Y Z
BR
BR, BR, BR,
DR DR DR DR
BR
DR
DR BR
1 2 1 2 1 2
year year year
Where was there a rise in population in year 1 and a fall in population in year 2?
25 Why might the emigration of workers help the economy of a developing country?
26 What combination of changes in the birth rate and death rate is most likely to increase the
dependency ratio in a country?
A falls falls
B falls rises
C rises falls
D rises rises
27 What might cause the balance on the current account of Mauritius to improve?
29 It has been suggested that all countries producing arms should ban the export of weapons and
cut production in order to reduce the risk of war.
30 The value of the Pakistani rupee changes, from 60 rupees to US$1, to 50 rupees to US$1.
What effect will this have on the price of Pakistani products sold in the US and the price of US
products sold in Pakistan?
A increase increase
B increase decrease
C decrease increase
D decrease decrease
PPC2
capital PPC1
goods
O consumer goods
What may cause the movement of the production possibility curve from PPC1 to PPC2?
2 An increase in the number of manufacturing robots in the car manufacturing industry represents
an increase in the quantity of which factor of production?
A capital
B enterprise
C labour
D land
3 The diagram shows the choices for an individual between leisure and earnings.
18
15
12
hours of leisure X
9
per day
Y
6
0
10 20 30 40 50 60
earnings $
What is the opportunity cost to the individual of the extra earnings when moving from position X
to position Y?
A $10
B $40
C 3 hours of leisure per day
D 9 hours of leisure per day
6 Developers want to increase the size of a major retail shopping area in a city. It is thought that the
proposal would create hundreds of jobs, be profitable for the shops but cause major traffic
congestion.
S2
S1
P2
price P1
D
O Q2 Q1
quantity
What would have caused the equilibrium price to rise from OP1 to OP2?
9 What is the usual reason why citizens trust their country’s banknotes?
10 In the diagram, D1D1 and S1S1 represent the demand for and the supply of labour. W indicates a
legal minimum wage.
An influx of immigrant labour causes the supply curve for labour to shift from S1S1 to S2S2.
D1 S1
S2
W
wage
($)
S1 D1
S2
0 1 2 3 4 5 6 7 8 9 10
labour (millions)
How many people will be employed if the minimum wage legislation is then abolished?
For these three people, what is the most likely order of income, from highest income to lowest
income?
A X→Y→Z
B Y→X→Z
C Y→Z→X
D Z→X→Y
A by maximising the difference between its total revenue and total cost
B by maximising the number of goods that it sells
C by minimising the number of goods that it keeps in stock
D by minimising the difference between average revenue and average cost
13 Which characteristic does a firm in perfect competition have in common with a monopoly?
14 The table shows the units of factors of production that a firm needs to employ for two different
levels of output.
5 2 4 100
10 4 8 150
15 The diagram shows the demand and supply of places in independent (private) schools which
charge fees. The equilibrium position is X.
The costs of independent (private) schools rise. Also a report is issued which states that
Government schools achieve very good examination results.
C
B
price A X
O quantity
18 A government decides to make two changes to its taxation policies. It lowers the tax on petrol and
raises the tax on food.
$m
20 What is Gross Domestic Product (GDP) divided by to calculate GDP per head?
A net migration
B the birth rate
C the total population
D the working population
A cash holders
B creditors
C debtors
D fixed income earners
22 The table gives information about three economic indicators in four countries.
24 Why may the figure calculated for a developing country’s Gross Domestic Product be inaccurate?
A 100 800 51
B 200 6000 62
C 300 600 48
D 1000 1600 63
26 It has been predicted that by 2050 China will have 53 million fewer children under 14, 100 million
fewer workers and 234 million more people aged over 60.
27 What might cause the balance on the current account of Mauritius to improve?
29 It has been suggested that all countries producing arms should ban the export of weapons and
cut production in order to reduce the risk of war.
30 70% of the 10 million kilograms of tea produced in India is exported. The UK, Japan, and
Germany buy the most.
Wholesale prices rose 10% in 2013 as supply was restricted because of a strike.
A a $20 banknote
B an office
C a photocopier
D a secretary
2 The diagram shows the production possibility curve (PPC) of a country producing at point T.
U
health V
services T
S W
O
non-health
services
The country has an ageing population and decides to allocate more resources to the production
of health services.
A T to S B T to U C T to V D T to W
● If the land is used only for farming it would yield income after tax of $10 billion.
● If the land is used only for shale oil extraction it would yield income after tax of
$40 billion.
● The government would receive $5 billion in taxes from farming and $10 billion in
taxes from shale oil extraction.
What is the opportunity cost of using the land only for farming?
How would this affect the market for sugary drinks as shown on a demand and supply diagram?
7 What is not held constant when constructing the supply curve of a firm?
10 Which statement explains why the pay of doctors is usually higher than the pay of hospital
cleaners?
borrowing saving
A falls falls
B falls rises
C rises falls
D rises rises
variable cost
fixed cost
per good
$2 $40
A $1 B $2 C $4 D $80
A higher prices
B higher profits
C higher taxes
D more choice
A diversification
B horizontal merger
C specialisation
D vertical merger
18 Why does more emphasis on education and training lead to an increase in national output?
19 In the past, governments have adopted policies to try to end a recession in their country and
increase economic growth.
21 What is defined as ‘a reduction in gross domestic product (GDP) for more than two successive
quarters’?
A deflation
B falling wages
C recession
D rising unemployment
A – 5% B – 1% C + 4% D + 9%
A consumer spending
B government spending
C income tax
D wages
24 A country has a declining population. It also has a changing population structure in which the size
of the 15–64 age group is becoming smaller.
25 The Human Development Index (HDI) ranks human development in countries from 0 (lowest) to 1
(highest).
26 Which combination of changes is most likely to result in a fall in living standards in a country?
28 What would increase the demand for a country’s currency on the foreign exchange market?
$m
primary income (net income transfers) 1000
secondary income (net current transfers) –500
total value of exported goods 1000
total value of imported goods 2000
total value of exported services 800
total value of imported services 200
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To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.
Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.
Which type of agriculture would make the best use of the resources of developing and developed
economies?
developing developed
A capital-intensive capital-intensive
B capital-intensive labour-intensive
C labour-intensive capital-intensive
D labour-intensive labour-intensive
2 A farmer reduces the land used to grow wheat from 80 hectares to 60 hectares and increases the
use of the land for growing potatoes from 80 to 100 hectares.
3 The diagram shows the change in an economy’s production possibility curve (PPC) from year 1
to year 2.
goods
year 2
year 1
O
services
A Resources have moved from the production of services to the production of goods.
B The number of workers unemployed in manufacturing has fallen.
C The producers of services have introduced better technology.
D The workers in the production of goods have become less efficient.
5 A private sector firm is given a contract by the government to supply a country’s water.
7 The table shows the effect of a change in the market price from $5 to $6 on the supply of mobile
(cell) phones.
price supply
($) (units)
5 10 000
6 15 000
Which statement about the price elasticity of supply of mobile phones is correct?
9 What would be least likely to act as a store of value during a period of rapid inflation?
A cash
B gold
C property
D shares
10 The table shows how three people (X, Y and Z) spend their income.
For these three people, what is the most likely order of income, from lowest income to highest
income?
A Y→X→Z
B Y→Z→X
C Z→X→Y
D Z→Y→X
11 The table shows the weekly values of certain items for the average person in each group.
A monopoly
B multinational corporation
C public corporation
D public limited company
10 20 80
20 50 110
30 80 140
40 110 170
What is the firm’s total revenue and the price of the product?
A 10 10
B 2 000 200
C 20 000 10
D 20 000 200
A increase tariffs
B increase value added tax
C reduce income tax
D reduce domestic subsidies
18 A government lowers interest rates to encourage more borrowing and spending by households to
increase economic growth.
19 Which policy would be most likely to reduce unemployment in the short run?
A a programme of privatisation
B a reduction in the standard rate of income tax
C grants to firms to research new technology
D removal of all restrictions on imports into the country
22 What is an example of someone who lost their job because of structural unemployment?
A Aneesha lost her job as an engineer when her firm had to make redundancies in a recession.
B Jamie lost his job as an ice cream seller during the winter months when little ice cream was
sold.
C Sunjeev decided to stop working and claim benefits when the government increased
unemployment benefits.
D Sunjit lost his job as a bank worker when the bank replaced his job with a new computer
system.
A a reduction in imports
B a reduction in the number of doctors per capita
C an increase in absolute poverty
D an increase in incomes
26 The table shows the birth rate and death rate for four countries for a given year.
If there is no migration, which country has the greatest rate of increase in population?
A Botswana 30 7
B Brunei 27 3
C Indonesia 24 8
D Mauritius 21 7
27 What usually decreases when there is a depreciation of a country’s foreign exchange rate?
A higher prices
B higher unemployment
C higher welfare
D wider consumer choice
29 The table shows a country’s balance of payments that has no secondary income (current
transfers).
item $ million
30 Skin creams preventing sunburn made in the European Union (EU) are more effective than those
made in the United States (US). US tourists stock up on the creams when visiting Europe. Such
creams are banned from production in the US because of the chemicals in them. In 2013,
negotiations began to remove this ban in order to allow production in the US.
How is this freer trade likely to affect manufacturers of skin creams in the US and the EU?
manufacturers manufacturers
in the US in the EU
A gain gain
B gain lose
C lose gain
D lose lose
3 A student decides to buy a ticket for a concert instead of buying a new shirt.
A the concert
B the price of the ticket to the concert
C the shirt
D the time spent purchasing the ticket
4 In a market system who has the most important role in influencing the allocation of resources?
A consumers
B entrepreneurs
C government officials
D producers
5 The diagram shows the market for oil. The initial equilibrium is X.
If the quantity of oil sold increased by two million barrels a day, which point represents the new
equilibrium?
price
S2
A
S1
B
X
D S3
D2 D1 D3
O
quantity
7 The table shows the demand for chocolates at two different prices.
price quantity
$ demanded
0.50 400
0.45 480
What is the price elasticity of demand when the price falls from $0.50 to $0.45?
10 A trade union succeeds in raising the wages in an industry above the equilibrium wage.
A fall fall
B fall rise
C rise fall
D rise rise
12 Which statement explains why firms in perfect competition are not able to exploit consumers?
A conglomerate merger
B diversification
C horizontal integration
D vertical integration
14 The table shows some of the costs of running a retail shop in one week.
15 A company’s annual report suggested that it had benefited from some changes.
A an improvement in road and rail facilities that has reduced its distribution costs
B an increase in the number of local specialist workers that it could recruit
C the introduction of new training at a local college for which staff have enrolled
D the reduction in the company’s costs by the purchase of a factory supplying components
Which policy is most likely to encourage producers to increase their output of that good?
19 Which pair of government actions combines a fiscal policy with a supply-side policy?
20 What is a recession?
22 The table shows the percentage change in employment over a period for a country with three
economic sectors.
economic change in
sector employment (%)
agriculture –6
manufacturing +2
services +4
23 Official statistics in 2010 showed South Africa had a very high unemployment rate at around
25%, although wages were double those in Brazil.
What might be a reason for South Africa’s high wages in a time of high unemployment compared
with Brazil?
25 Which combination of changes in a government’s budget will lead to greater income inequality?
health and
direct taxes indirect taxes
education spending
26 The table shows the percentage of the working population in different sectors in three countries.
Iran 38 33 29
Nepal 93 2 5
UK 2 42 56
A Iran has fewer people working in the secondary sector than the UK.
B Nepal is a developed economy.
C The tertiary sector is more developed in Iran than in Nepal.
D The UK is dependent on the primary sector.
27 Which method of trade protection has the most predictable effect in controlling the level of
imports?
A quotas on imports
B safety and quality regulations for imports
C subsidies to domestic producers
D tariffs on imports
28 What would cause a favourable change in the Indian trade in services (invisible) account?
29 In October 2015, one UK pound could be exchanged for 100 Indian rupees. By October 2016,
one UK pound could be exchanged for 80 Indian rupees.
30 A country imports oil which is used in the production and distribution of goods. The country has
also experienced a rise in incomes which has resulted in a large increase in the demand for
goods, some of which it imports.
What is likely to happen to the country’s balance of trade in goods (visible) and to the price of oil?
balance of
price of oil
trade in goods
A improves falls
B improves rises
C worsens falls
D worsens rises
1 A person bought a shop and stocked it with fresh fruit. He employed one member of his family to
help in the shop.
2 The diagram shows a production possibility curve for a country. As a result of an increase in
demand for manufactured goods it moves from a situation of unemployment to full employment.
agriculture E
F G
H
O
manufactured goods
A by a movement from E to G
B by a movement from F to E
C by a movement from F to G
D by a movement from G to H
3 The diagram shows the choices for an individual between leisure and earnings. He currently
earns $25 a day.
24
hours of
leisure 18
per day
12
0
0 20 40 60 80 100
earnings ($)
What is the opportunity cost for the person if he accepts more work and earns $75 a day?
A $25
B $50
C 6 hours of leisure a day
D 12 hours of leisure a day
A a growth of competition
B a spread of pollution
C a surplus of production in the short term
D an existence of scarcity
5 What will be the impact on the market for oil of the closure of the world’s largest oil field for
maintenance work?
price T
S
X
V
W
D
O Y Z
quantity
What will happen to total revenue if the price of the product is reduced by 3%?
9 The table shows the change in income for selected occupations between 1995 and 2015.
change in
occupation
income %
car assembly
workers 110
builders 110
teachers 60
nurses 30
shop assistants –5
Put the three people in the most likely order of income from the lowest to the highest income.
A X, Y, Z B X, Z, Y C Y, Z, X D Z, Y, X
14 The high volume of goods sold by large supermarkets enables them to reduce prices, but the
most important advantage that these businesses have is that they can sell non-food items as well
as food.
Which economic results does the statement suggest are available to large supermarkets?
15 A firm produces five units of output at an average cost of $20 per unit. The cost of the sixth unit
is $26.
18 A worker earns $60 000 a year and pays 25% income tax. He spent $2000 on furniture and
$5000 on a computer and paid 20% sales tax on each.
19 The Indian government gives farmers a subsidy of $5 per kilo to supply food in a market where X
is the equilibrium position.
S3 S1
20 S2
price
($ per kilo) X
15
10
D1
5
0
5 10 15 20 25 30
quantity supplied
(’000 kilos)
What will be the new equilibrium price and quantity supplied as a result of the subsidy?
A 10 20
B 13 25
C 15 20
D 20 10
21 Which combination of changes in national output and population would cause an increase in GDP
per head?
22 The table shows the Consumer Price Index (CPI) of an economy over five years.
year CPI
1 100
2 103
3 105
4 107
5 110
23 In a year the rate of inflation in a country was 3%. During that year company managers’ salaries
rose by 6% and office workers’ wages rose by 2%.
company office
managers workers
A fell fell
B fell rose
C rose fell
D rose rose
24 Developing countries often wish to prevent the population in rural areas moving to the towns.
Investment grants are given to companies if they set up their businesses in rural areas.
25 The population structure of many developed countries is changing. Birth rates are low, those
over 65 are living longer and the working population (16-65 years) is a smaller proportion of the
total population.
percentage of
life expectancy computers per labour force birth
(years) 100 population employed in rate
agriculture
On the basis of the information given, what is the likely ranking order of the four countries in
terms of development, starting from the most developed to the least developed?
27 The table shows details of India’s current account of the balance of payments in the 1st quarter of
2014.
$ billion
A surplus of $9bn
B surplus of $17bn
C surplus of $27bn
D surplus of $33bn
A a tax on emissions
B a tax on imports
C a tax on income
D a tax on property
30 The diagram shows the market for the Indian rupee priced in US dollars. The equilibrium point is
at X.
If more Americans take holidays in India and fewer Indians buy American exports, in which sector
of the diagram will the new equilibrium point for price and quantity of the Indian rupee be?
S
price of
rupee (US$)
A
D B
X
D
O
quantity of rupees
1 An economy with few resources is encouraged to improve the quality of its human resources.
2 The diagram shows a country’s production possibility curve for rice and wheat.
P
rice
Q R S
O wheat
A P to Q B Q to R C R to S D S to P
What is the opportunity cost of this increased period of school education to the young people
affected?
A a decrease in supply
B a fall in price
C an increase in demand
D a rise in price
What will happen to total revenue if the price of the product falls by 25%?
6 In 2014, a plan for a major new rail link funded by central and regional government was
announced. It would involve the redevelopment of a city area, generate 14 000 jobs and allow the
development of 2000 homes and offices for private businesses.
8 What is a disadvantage for a trade union representing workers in a company that has increased
specialisation?
9 A government finance minister said that the purchasing power of most people’s incomes had
risen in the last year.
A money wages
B net income after tax
C real wages
D wage rates
10 The table shows the change in incomes for a number of occupations between 2003 and 2013.
change in
occupation income
%
builders 80
plumbers 60
electricians 50
police officers 12
teachers 10
nurses –5
A $1 000 $800
B $5 000 $1 600
C $6 000 $2 400
D $50 000 $16 000
Joel owns and runs a mobile telephone accessories and repair shop.
A multinational company
B partnership
C public company
D sole proprietor
What is the firm’s total revenue and the price of the product?
A 20 20
B 1 000 500
C 20 000 20
D 20 000 500
15 The table shows the daily output and costs of four firms making chairs.
A 6 100 140
B 9 30 150
C 12 200 160
D 15 120 330
A a basket of goods
B average incomes
C economic growth rate
D income tax rate
22 The table shows the percentage changes in earnings and consumer prices for four countries for
one year.
Which country is likely to have experienced the greatest increase in real income during the year?
23 In the US Consumer Price Index (CPI), food has a weighting of 13.7%. In India food has a
weighting of 46.2% in the CPI.
25 A country has a birth rate of 30 per 1000 and a death rate of 35 per 1000 and no migration.
26 The diagram shows the different age distribution of the population in three areas of the world.
%
69.6
65.6
60.7
area X
area Y
35.1
area Z
21.5
18.1
12.9 12.3
4.2
Other things being equal, what can be deduced from the diagram?
28 Drinks producers in India are resisting plans to remove tariffs on imported drinks. They claim that
a reduction in tariffs would destroy the emerging drinks industry with large-scale imports of cheap
drinks.